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The Altium Limited (ASX: ALU) share price has been on an upward trajectory, gaining 8% in the last month and doubling in value over the past five years. This positive trend is noteworthy in the context of ASX technology stocks. Currently trading at $45.65, the question arises: can it hit $50 in 2024? While predicting share price movements is inherently uncertain, examining key factors provides insights into this possibility. Investors in ASX technology stocks may closely monitor Altium's performance to gauge the potential for reaching the $50 mark in the coming year.
Profit Growth as a Driver:
Historically, companies that consistently grow their profits often witness parallel increases in share prices. Altium, a provider of electronic PCB design software, achieved notable financial success, with FY23 showcasing a 19.2% revenue growth to US$263.3 million, a 29.3% rise in net profit before tax to US$87.8 million, and a 19.6% increase in net profit after tax (NPAT) to US$66.3 million. The company anticipates a 20% to 23% revenue growth in FY24, reaching between US$315 million to US$325 million.
Long-Term Vision:
Altium's future outlook remains positive, targeting US$500 million in revenue and 100,000 subscribers by FY26, potentially leading to improved profit margins.
Valuation Considerations:
While Altium's success is well-acknowledged, the market's valuation plays a crucial role. UBS estimates an annual increase in Altium's earnings per share from FY24 to FY28. According to UBS, Altium's EPS could reach US 62 cents in FY24, implying a valuation of 49x FY24's estimated earnings and 27x FY28's estimated earnings after conversion to Australian dollars.
Market Expectations and Analyst Projections:
Altium's forward P/E ratio needs to rise further to reach $50 in 2024. UBS, however, maintains a price target of $40.60, suggesting a potential decrease in the Altium share price over the next 12 months. While reaching $50 is plausible eventually, achieving this target in 2024 might be challenging, given the existing market expectations for robust profit growth in the near term.
In conclusion, Altium's path to $50 is contingent on sustained revenue, margin improvement, and rising net profit. Although achievable, the timeline might extend beyond 2024, considering the market's current anticipation of strong profit growth in the coming years.
